GE to Reverse Split 1-for-8

The stock market is up again thanks to a tame inflation report. This morning, the government said that consumer prices rose 0.4% last month. (Actually, looking at the decimals, the increase was 0.35%.) Over the last year, inflation is running at 1.7%.

Core prices rose by 0.1%. In the last year, core inflation was 1.3%.

Higher inflation is expected in the coming months as price declines early in the COVID-19 pandemic wash out of the calculations, but there is no consensus among economists on whether it would stick beyond the so-called base effects as a faster pace of vaccination allows the economy to reopen quickly.

Some argue a very expansionary fiscal policy, marked by nearly $900 billion in additional pandemic relief money in late December and President Joe Biden’s $1.9 trillion rescue package, expected to be approved by Congress this week, could stoke inflation. That, together with the Federal Reserve’s monthly bond purchases could cause the economy, which plunged into recession in February 2020, to overheat.

U.S. Treasury yields have spiked in anticipation of stronger economic growth this year and higher inflation. But other economists, including Federal Reserve Chair Jerome Powell, believe any rise in price pressures will be transitory.

There is plenty of slack in the labor market, with at least 18 million Americans on unemployment benefits.

General Electric said it’s going to do a 1-for-8 reverse stock split. That means shareholders will own one-eighth as many shares, but the share price will increase eightfold. That would bring the share price to about $100, based on today’s trading.

If GE had kept pace with the overall market over the last 20 years, the share price would already be close to $100 instead of $13. The losses here have been staggering.

GE was an original Dow stock in 1896. Interestingly, only 18 Dow stocks remain since the start of 2008. The yearly turnover is low, but it gradually adds up.

From 1939 to 1979, the Dow changed six stocks.

Posted by on March 10th, 2021 at 10:51 am


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.